LONG v. ABBRUZZETTI (59911)

OPINION BY JUSTICE BARBARA MILANO KEENAN
FROM THE CIRCUIT COURT OF THE CITY OF ALEXANDRIA

Thomas A. Fortkort, Judge Designate
Present: All the Justices

The dispositive issue in this appeal is whether a plaintiff
who recovered consequential damages for breach of contract
presented sufficient evidence that those damages were within the
contemplation of the parties at the time the contract was made.

Francesco Abbruzzetti (the plaintiff) filed a motion for
judgment against Stefan C. Long, seeking damages for Long’s
alleged breach of his oral contract to act as escrow agent for
the plaintiff and his former wife, Josephine Wendy Abbruzzetti.
The plaintiff and Long filed cross-motions for summary judgment
and agreed, pursuant to Rule 3:18, that the trial court could
consider certain depositions, in addition to the pleadings and
admissions, in deciding the case.

The trial court considered the following facts in ruling on
the motions. On October 6, 1992, at 3:45 p.m., the plaintiff and
Mrs. Abbruzzetti executed an "Offer to Purchase," in
which the plaintiff agreed to purchase Mrs. Abbruzzetti’s
interest in their jointly owned restaurant, Trattoria da Franco,
located in the City of Alexandria. The Offer to Purchase and an
accompanying escrow agreement executed by the plaintiff and Mrs.
Abbruzzetti required the plaintiff to deliver to Long, the escrow
agent who was also Mrs. Abbruzzetti’s attorney, several items
including a cash down payment, a note payable to Mrs. Abbruzzetti
for the balance of the purchase price, and evidence of Mrs.
Abbruzzetti’s release from liability on notes held by the Bank of
Alexandria and the First Commonwealth Savings Bank. The Offer to
Purchase specified that "[a]ll parties agree to execute all
required documents within 72 HRS of execution of this
agreement," and stated that if the plaintiff was unable to
perform in accordance with the agreement, it would become null
and void, and an alternate agreement allowing Mrs. Abbruzzetti to
purchase the restaurant would take effect.

On October 6, 1992, the plaintiff delivered the down payment
to Long, who deposited the check in his escrow account. The
escrow agreement directed Long to release the down payment to
Mrs. Abbruzzetti when he received all the documents required from
the plaintiff under the terms of the Offer to Purchase. On
October 9, 1992, Long received from Charles O. Cake, the
plaintiff’s attorney, several items including letters from the
Bank of Alexandria and First Commonwealth Savings Bank, which
indicated that the plaintiff had initiated, but not completed,
action to assume full responsibility for the two loans.

On October 9, 1992, at about 4:00 p.m., Mrs. Abbruzzetti
delivered a letter to Long stating that the plaintiff had failed
to comply with the terms of the Offer to Purchase because he had
not obtained her release on the notes held by the two banks, and
she presented written verification from both banks to that
effect. At Mrs. Abbruzzetti’s request, Long wrote the plaintiff a
letter stating that "[i]t has been brought to my attention
that you have failed to comply with the offer to purchase."
Long stated in the letter that Mrs. Abbruzzetti was exercising
her option to purchase the restaurant and that, "[p]ursuant
to her offer of purchase, she is entitled to assume control of
the family business forthwith." Long gave the letter to Mrs.
Abbruzzetti.

Long stated in his deposition that he did not make an
independent attempt to verify the contents of the bank letters
because he had not received the releases within the 72-hour time
period specified in the Offer to Purchase. When asked if he
"simply took [Mrs.] Abbruzzetti’s word," Long stated,
"[a]ll I know is she said 72 hours had expired and that he
had not complied."

Mrs. Abbruzzetti delivered a copy of Long’s letter to Cake and
then went to the restaurant, bringing the letter and her check
for the down payment to exercise her purchase option. She was
accompanied by two security guards she had hired that morning.
The plaintiff arrived at the restaurant a few hours after Mrs.
Abbruzzetti and became angry when she informed him that she was
taking possession of the restaurant. The plaintiff left the
restaurant and returned with two policemen who determined, on the
basis of Long’s letter, that Mrs. Abbruzzetti was entitled to
possession of the business. The plaintiff left the restaurant and
later filed a suit for specific performance of the Offer to
Purchase.

In January 1993, in the suit for specific performance, the
trial court entered an order granting the plaintiff immediate
possession of the restaurant, holding that he had complied with
the terms of the October 6, 1992 Offer to Purchase. The plaintiff
then filed this motion for judgment against Long, seeking
recovery of the attorney’s fees he expended in the specific
performance suit.

In a letter opinion addressing the parties’ cross-motions for
summary judgment, the trial court held that the plaintiff was
entitled to damages for Long’s "failure to investigate the
default circumstances claimed by his client." The court
ruled that although Long did not have any specific knowledge of
Mrs. Abbruzzetti’s intended actions beyond her intent to deliver
the letter and check to the plaintiff’s attorney, "it was
clearly foreseeable that she would make some effort to enforce
her claim and that such effort would cause the plaintiff some
damage either in business losses or potential attorney fees in
defending against Mrs. Abbruzzetti’s claim." The court
awarded summary judgment to the plaintiff, ruling that Long’s
failure to investigate the plaintiff’s alleged default under the
terms of the Offer to Purchase entitled the plaintiff to recover
his attorney’s fees incurred in the specific performance suit.[1]

On appeal, Long contends that the attorney’s fees incurred in
the specific performance suit were consequential damages not
reasonably foreseeable at the time his contract as escrow agent
was made, because those damages were the direct result of Mrs.
Abbruzzetti’s action ousting the plaintiff from the restaurant.
In response, the plaintiff asserts that the attorney’s fees were
damages directly flowing from Long’s breach of contract, and that
the resolution of this issue is governed by Hiss v. Friedberg,
201 Va. 572, 112 S.E.2d 871 (1960). In the alternative, the
plaintiff asserts that even if the attorney’s fees were
consequential damages, they are recoverable because they were
reasonably foreseeable at the time the contract was made. We
disagree with the plaintiff.

As stated above, this case was submitted to the trial court
based on the parties’ cross-motions for summary judgment. Since
the parties agreed to the trial court’s consideration of certain
depositions as evidence, we are required to consider them as part
of the record the parties have presented. See Code ? 8.01-420; Rule 3:18; Carson
v. LeBlanc, 245 Va. 135, 137, 427 S.E.2d 189, 190 (1993). In
this procedural posture, we review the trial court’s judgment
under Code ? 8.01-680,
which provides that the judgment will not be set aside unless it
appears from the record that the judgment is plainly wrong or
without evidence to support it. Id.; see alsoW.S.
Carnes, Inc. v. Board of Supervisors of Chesterfield County,
252 Va. 377, 385, 478 S.E.2d 295, 301 (1996); Ravenwood
Towers, Inc. v. Woodyard, 244 Va. 51, 57, 419 S.E.2d 627, 630
(1992).

If damages are direct, they are compensable. In contrast, if
damages are consequential in nature, they are compensable only if
the special circumstances were within the contemplation of all
contracting parties at the time the contract was made. NAJLA
Associates, Inc., 253 Va. at 86-87, 480 S.E.2d at 494; Morris
v. Mosby, 227 Va. 517, 523, 317 S.E.2d 493, 497 (1984).
"Contemplation," in this context, includes both
circumstances that are actually foreseen and those that are
reasonably foreseeable. Richmond Medical Supply Co., 235
Va. at 586, 369 S.E.2d at 409; Danberg v. Keil, 235 Va.
71, 76, 365 S.E.2d 754, 757 (1988).

The issue whether damages are direct or consequential is a
question of law. However, the issue whether special circumstances
were within the contemplation of the parties is a question of
fact. NAJLA Associates, Inc., 253 Va. at 87, 480 S.E.2d at
494; Roanoke Hospital, 215 Va. at 801, 214 S.E.2d. at 160.

We disagree with the plaintiff’s assertions that the damages
here are direct, rather than consequential, and that this case is
controlled by Hiss v. Friedberg. In Hiss, the
plaintiffs employed attorneys Hiss and Rutledge to search the
title to their recently purchased real estate, procure title
insurance, and settle the transaction. Due to an allegation of an
unrecorded lease on the property, an escrow agreement was
executed in which Hiss and Rutledge were authorized to deliver
the cash and notes to the sellers, and to record the deeds, when
they had received a title insurance policy guaranteeing the
plaintiffs a fee simple title to the property "free and
clear of any liens and encumbrances whatsoever." 201 Va. at
574-75, 112 S.E.2d at 874.

Although they had not procured such a policy, Hiss and
Rutledge nevertheless recorded the deeds and delivered the cash
and notes to the sellers. The policy issued after these acts
occurred did not insure against "[r]ights of parties in
actual possession of all or any part of the premises other than
the insured." Id. at 575, 112 S.E.2d at 874.

After filing suit against the sellers for breaches of warranty
and covenants, the plaintiffs settled their claim, reserving the
right to proceed against Hiss and Rutledge. In the action against
Hiss and Rutledge, the trial court awarded the plaintiffs, among
other things, counsel fees incurred in their litigation against
the sellers. Id. at 575-76; 112 S.E.2d at 874.

On appeal, we recognized that, in the absence of contractual
or statutory liability, attorneys’ fees incurred in present or
previous litigation between the same parties generally are not
recoverable. However, we also stated that when a breach of
contract has forced a plaintiff to maintain or defend a suit
against a third person, the plaintiff may recover reasonable
attorneys’ fees incurred by him in the former suit. Id. at
577, 112 S.E.2d at 875-76. We concluded that since the
purchasers’ suit against the sellers was a direct and necessary
consequence of the attorneys’ breach, the plaintiffs were
entitled to recover damages for the attorneys’ fees they incurred
in that litigation. Id. at 579, 112 S.E.2d at 876-77.

Unlike the direct damages sustained by the plaintiffs in Hiss,
the damages alleged here were not the direct and necessary
consequence of Long’s alleged breach of contract as escrow agent.
The damages were the direct and necessary result of Mrs.
Abbruzzetti’s action in having the plaintiff physically ejected
and barred from the restaurant. Moreover, it is purely
speculative whether such fees would have been incurred had Mrs.
Abbruzzetti not taken this action. Thus, we conclude that the
plaintiff’s attorney’s fees in the specific performance suit were
consequential, rather than direct, damages because they arose
from the intervention of special circumstances not ordinarily
predictable.

We next consider whether the record supports the trial court’s
finding that these damages were reasonably foreseeable. We apply
the above-stated rule that the foreseeability of consequential
damages is determined as of the time the contract was made. SeeNAJLA, 253 Va. at 87, 480 S.E.2d at 494; Richmond
Medical Supply Co., 235 Va. at 586, 369 S.E.2d at 409; Roanoke
Hospital, 215 Va. at 801, 214 S.E.2d at 160.

We conclude that the record does not contain evidence that, at
the time Long was employed as escrow agent, it was reasonably
foreseeable that Mrs. Abbruzzetti’s actions would require the
plaintiff to incur attorney’s fees in a specific performance
suit. There is no evidence indicating that Mrs. Abbruzzetti had
engaged in such conduct before, or that the circumstances
surrounding the parties’ marital difficulties were so extreme
that conduct of this nature was reasonably likely to occur. Thus,
we hold that the record fails to support the trial court’s
conclusion that the damages in question were reasonably
foreseeable.

For these reasons, we will reverse the trial court’s judgment
and enter final judgment in favor of Long.

Reversed and final judgment.

FOOTNOTES:

[1]The court awarded the plaintiff
$42,785. Long stipulated to the amount of damages while reserving
the right to appeal on the issue of liability.